The Hindu Business Line : Direct delivery of grains for rations shops mooted

The National Commodities and Derivatives Exchange Ltd (NCDEX) has suggested that the Food Corporation of India (FCI) could ask suppliers to deliver foodgrains directly to Civil Supplies Department of the States rather than to its godowns.

A senior official of NCDEX told Business Line on Friday that the prices at which foodgrains are delivered to the public distribution system of the civil supplies department were far higher than the rate at which these are procured from the growers or their representatives. For example, wheat prices when delivered to the States for distribution in ration shops cost as high as Rs 1,090 a quintal against FCI's procurement price of Rs 650.

This is essentially because of the holding and transporation costs, which includes wastage and pilferage.

This would help the Governments to save the loss incurred in ensuring supplies to the public distribution system.

The official said NCDEX felt that the functions of FCI could be separated and handled differently. FCI stores commodities, mainly foodgrains, for three purposes — to build buffer stocks, to supply to PDS and provide a market for farmers in case surplus production leads to dip in prices.

The latter two functions could be addressed without having to physically store the commodities at the godowns. For public distribution, directly supply could be ensured to the Civil Supplies Department.

As regards, holding surplus farm produce, FCI could undertake options for farmers. That way, the farmer would have price support, but could hold on to the stocks and see if the market prices improve.

The official also said NCDEX also intended to enter the spot market. As trading on NCDEX was online, farmers could deliver anywhere to any buyer to get the best prices. The exchange would guarantee delivery to the buyer and payment to the farmer.

He said while the exchange was bringing down the "minimum quantity" for trading (one truck load of nine tonnes currently), the minimum quantity requirement kept out small farmers.

He suggested that farmers co-operatives, micro finance institutions or even rural branches of banks could act as aggregators of small quantities of produce. In fact, even warehouses could do the aggregation job, he said.

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